Suntech slashes view on dimmer prospects

Leading manufacturer of solar cells signals a chilly reality for industry

By

SteveGelsi

NEW YORK (MarketWatch) -- The cold reality of plunging energy prices and the credit crisis have cast a pall over recently hot shares of solar-panel makers, as a leading Chinese manufacturer slashed its revenue outlook to close out a dismal week in the sector.

Brian Yerger of Jesup & Lamont Securities said Friday that he expects "tremendous upheaval and probable shakeout of marginal producers" among solar stocks, which had previously resisted the market downturn in 2008 until this summer, after oil prices peaked.

Meanwhile, data from iSuppli Corp. show that solar polysilicon supply will outstrip demand by 2010.

Suntech blamed the depreciation of the euro vs. the dollar and the deferment of customer orders tied to delays in project financing.

On Friday, shares of Suntech rose 12% to $6.05, recovering some of their 40% loss in the previous session.

Jesup & Lamont's Yerger said Suntech could emerge a winner from the current downturn. "Suntech Power's leading position in the Chinese solar-manufacturing industry should enable the company to benefit." But he added that near-term results will be "severely impacted."

Credit Suisse reiterated its neutral rating on Suntech, and drastically cut its price target to $9.20 a share from $20 a share, adding that the "uncertain supply/demand picture and potential slip in new polysilicon suppliers could impact the company's 2009 margins and sales volume.

In one bright spot in the sector, Credit Suisse reiterated its outperform rating on First Solar Inc.
FSLR, -0.07%
on overblown fears of cheaper oil, redemption issues and frozen credit markets.

"After talking to several First Solar installers and independent power-producing utility customers and project financing banks, we reaffirm our belief that First Solar's high-quality customer base, accumulate customer goodwill and high bankability of its project franchise are sufficient to finance and support the company's production in 2009."

Shares of First Solar rose 6% to $92.81 Friday.

Earlier this week, Trina Solar said its quarterly earnings rose fivefold, reaching $32.1 million, or $1.17 a share, ahead of the Wall Street target of $1.13 a share. For the fourth quarter, it expects revenue of $190 million to $210 million, below the forecast of $272 million..

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